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2016 (8) TMI 964 - GUJARAT HIGH COURT

2016 (8) TMI 964 - GUJARAT HIGH COURT - TMI - TDS liability - limitation as prescribed as in Section 201 - Held that:- It is true that it is the duty of the assessee to deduct TDS and the question is whether it is likely to cause any loss to the revenue if it is not deducted in time. If TDS is not deducted, it is required to be paid in the first installment of advance tax, which is required to be paid within four months from the date of filing of return. Therefore, even if the contention of Mr.B .....

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HI HIGH COURT ) - It is true that the Court cannot legislate the Act, however, the Assessing Officer also cannot be given unfettered powers, which he can exercise even beyond the reasonable period of four years. Therefore, in our view, period of four years is just and proper and the Tribunal has not committed any error while passing the impugned order. Therefore, all these appeals are dismissed. The questions posed for our consideration are answered in favour of the assessee and against the .....

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nal ) in ITA Nos.2677, 2678, 2679 & 3859/Ahd/2006 dated 19.12.2008, whereby the appeal filed by the revenue was dismissed and appeal filed by the assessee was allowed. By filing Tax Appeal No.2252 of 2010, the revenue has challenged the order of the Tribunal dated 9.4.2010 passed in ITA No.448/Ahd/2007. 2. Since the facts in these appeals are similar, facts of Tax Appeal No.1426 of 2009 are narrated in brief for the purpose of deciding these appeals. It was noticed by the Assessing Officer t .....

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gly, the Assessing Officer passed order u/s. 201 & 201 (1A) and raised total demand of ₹ 18,15,843/- on 22.3.2006. 2.1 The assessee preferred an appeal before the CIT (A)-X, Ahmedabad against order u/s. 201 (1) & 201 (1A) of the I.T.Act, 1961. The Ld.CIT (A) had observed that the order passed by the Assessing Officer is beyond the limitation period of four years from the end of the Financial Year of Assessment Year 1997-98. The CIT (A) relied the decisions of various Tribunals and .....

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d of four years of the F.Ys. relevant to the A.Ys. are held to be invalid and barred by time and dismissed all the appeals filed by the department for the A.Ys. 1997-98 to 1998-99. Against such orders passed in different appeals, present appeals are filed. 3. At the time of admitting these Appeals, following question of law was framed:- TAX APPEAL Nos.1426 to 1428/2009 Whether the Appellate Tribunal is right in law and on facts in confirming the order passed by CIT(A) in deleting the penalty lev .....

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ct"] and further sum of ₹ 3,21,948/- charged as interest under Section 201[1A] of the Act, without appreciating the fact that no period of limitation is provided in the Act for passing orders under the above sections. 4. Mr.Bhatt, learned counsel for the appellant submitted that the Tribunal has committed an error in passing the impugned orders. He submitted that the Tribunal has committed an error in relying upon the decision of the Delhi High Court while passing the impugned orders. .....

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vision prescribing any limitation for passing the order under sections 201(1) and 201(1A) of the Act. According to the learned counsel, in view of the apex court judgment in Hindustan Times Ltd. v. Union of India, AIR 1998 SC 688, where no limitation is prescribed, the ru1e that power shou1d be exercised within reasonable time is not applicable in the to facts of the present case. Reference was also made to the judgment of of the Kerala High Court in CIT v. Trichur Cooperative Bank Ltd. [2004] 2 .....

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for the Revenue. In Hindustan Times Ltd. s case AIR 1998 SC 688, the employer had defaulted in making the payment of provident fund contributions. Notice was issued by the Department under the Employees Provident Funds and Miscellaneous Provisions Act, 1952, on February 23, 1971, complaining of delay in remitting the provident fund amount for the various periods from July 1965 to November, 1968. After certain correspondence between the defaulter and the Department, order for recovery as damages .....

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693) : "18. Now, the Act does not contain any provision prescribing a period of limitation for assessment or recovery of damages. The monies payable into the Fund are for the ultimate benefit of the employees but there is no provision by which the employees can directly recover these amounts. The power of computation and recovery are both vested in the Regional Provident Commissioner or other officer as provided in section 14B. Recovery is not by way of suit, initially, it was provided tha .....

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ents, over a period of more than thirty years, the Legislature did not think fit to make any provision prescribing a period of limitation. This, in our opinion, is significant and it is clear that it is not the legislative intention to prescribe any period of limitation for computing and recovering the arrears. As the amounts are due to the Trust Fund and the recovery is not by suit, the provisions of the Indian Limitation Act, 1963, are not attracted. In Nityanand M. Joshi v. Life Insurance Cor .....

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ly a period of limitation. It was observed : It seems that where the Legislature has made no provision for limitation, it would not be open to the court to introduce any such limitation on the grounds of fairness or justice. The above decisions have been recently accepted in Mukri Gopalan v. Cheppilat Puthanpurayil Aboobacker [1995] 5 SCC 5 (at pages 20-22) to which one of us (Majmudar, J.) was a party while dealing with the applicability of section 29(2) of the Limitation Act, 1963, to courts o .....

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le time. The said judgment has been applied in matters relating to section 6 of the Land Acquisition Act in a large number of cases, which were all referred to recently in Ramchand v. U0I [1994] 1 SCC 44. In our view, this line of cases cannot ordinarily apply to monies withheld by a defaulter, who holds them in trust. 21. The reason is that while in the above cases decided by this court the exercise of powers by the authority at a very belated stage was likely to result in the deprivation of pr .....

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nt Commissioner had made computations earlier and sent a demand immediately after the amounts fell due, the defaulter would not have been able to use these monies for his own purposes or for his business. In our opinion, it does not lie in the mouth of such a person to say that by reason of delay in the exercise of powers under section 143, he has suffered loss. On the other hand, the defaulter has obviously had the benefit of the boon of delay which is so dear to debtors , as pointed out by the .....

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The position of the employer in case of default under section 14B is no different. 10. Applying the above noted principles to the facts in hand, it cannot be concluded that the order passed by the Assessing Officer under section 201(1) and 201(1A) of the Act was liable to be annulled on the ground of delay and laches. 4.1 He has also relied upon the decision of the Calcutta High Court in the case of Bhura Exports Ltd. v. Income-Tax Officer reported in [2014] 365 ITR 548 (Cal), wherein it is hel .....

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thal Deo reported in AIR 1997 SC 2695 where the contention that in the absence of any period of limitation for filing application for execution under a given statute, a reasonable period of limitation should be applied and an application for execution filed after 12 years should not be entertained was turned down by making the following observations: Mr.Bhasme, learned counsel for the appellant, contends that in the absence of fixation of rule of limitation, the power can be exercised within a r .....

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licant has become final. Section 21 of the Mamlatdar s Court Act does not prescribe any limitation within which the order needs to be executed. In the absence of any specific limitation provided thereunder, necessary implication is that the general law of limitation provided in Limitation Act (Act 2 of 1963) stands excluded. The Division Bench, therefore, has rightly held that no limitation has been prescribed and it can be executed at any time, especially when the law of limitation for the purp .....

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itation would apply to the filing of an application under section 43 of the Pepsu Tenancy Act of 1955 since no such period was prescribed by that Act and the Limitation Act had also no application to a proceeding under the Pepsu Tenancy Act. 17. Under the Income-tax Act, there is no scope of applying the provisions of the Limitation Act as would appear from the fact that in section 260A itself, the power of condonation of delay in filing the appeal has been incorporated by the Legislature by int .....

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ax Act is a selfcontained Code exhaustive of the matters dealt with therein and its provisions show an intention to depart from the common rule, qua tacit per alium facit per se." 18. Therefore, in applying the provisions contained in section 201 of the Act where the previous bar of limitation was lifted by the amendment and there was no period of limitation fixed for exercising such power at the relevant point of time, no question of invoking a reasonable period of limitation arises. 19. W .....

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completing the assessment is three years which can be extended to maximum five years on recording reasons by the Commissioner. In such a case, the said Bench held that if no period of limitation is prescribed, the statutory authority must exercise its jurisdiction within a reasonable period. According to the said Bench, what should be the reasonable period would depend upon the nature of the statute, rights and liabilities thereunder and other relevant factors. In that case, it was held that th .....

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ion of the Bench was not drawn to the earlier decisions of the Supreme Court of larger Bench in the cases of Uttam Namdeo Mahale v. Vithal Deo (supra) and Ishar Singh v. Financial Commissioner (Supra) indicated by us above taking a contrary view. 21. In the Case of CIT v. NHK Japan Broadcasting Corporation (supra), the Division Bench of the Delhi High Court by relying upon the decision of the Supreme Court in the case of Punjab Bhatinda District Co-operative Milk Producers Union Ltd. (supra), he .....

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the provisions of sections 147 and 148 of the Act deal with a situation where income escaped assessment whereas section 194A deals with the liability to deduct tax at the source although there may not be any escape of income from assessment in future. Therefore, in our opinion, the above Division Bench decision of the Delhi High Court does not reflect the correct position of law. 4.2 In view of above observations of different High Courts, he contended that the view taken by the Tribunal is not .....

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t Years for the assessment in question are 1997-1998, 1998-99, 1999-2000 and the proceedings in question are initiated four years after the same. He submitted that in the case of Commissioner of Income Tax v. NHK Japan Broadcasting Corporation reported in [2008] 305 ITR 137 (Delhi), Delhi High Court, which has been followed by all other Courts, Delhi High Court has considered the decision of the Supreme Court in the case of Bhatinda District Co-op. Milk Producers Union Limited [2007] RC 637 and .....

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se, in a worse position merely because it has admitted its liability. If the assessee had denied its liability, the question that would have arisen would be whether the Revenue could have initiated proceedings after a lapse of four years. The answer to that would of course have to be in the negative in view of the reason that we have already indicated above. The fact that the assessee agreed to pay the tax voluntarily cannot put the assessee in a situation worse than if it had contested its liab .....

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imitation is prescribed for exercising power under section 201(1) and 201(1A) of the lncometax Act, l96l, still if such power is not exercised within a reasonable period, the same would become time-barred. 8. In the case before the Delhi High Court, the assessee was a foreign company which carried on business in India. It had paid salary to its employees who were posted in India in two ways. Part of the salary was paid in lndia and part of the salary which was termed as "global salary" .....

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whether any period of limitation is applicable to proceedings under section 201 and 20l(1A) of the Act? The Delhi High Court noted that under section 191 of the Act, the primary liability to pay tax is on the person whose income it is that is the deductee. A duty is cast upon the person who makes the payment to deduct tax at source but it does not wash away the liability of the person whose liability it is to pay the same. It is still the liability of the earner of the income or the deductee to .....

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s concerned, our attention has been drawn to section 153(1) (a) thereof which prescribes the time limit for completing the assessment, which is two years from the end of the assessment year in which the income was first assessable. It is well known that the assessment year follows the previous year and, therefore, the time limit would be three years from the end of the financial years. This seems to be a reasonable period as accepted under section I53 of the Act, though for completion of assessm .....

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allenge before us, taken the view that four years would be a reasonable period of time for initiating action, in a case where no limitation is prescribed. The rationale for this seems to be quite clear if there is a time limit for completing the assessment, then the time limit for initiating the proceedings must be the same, if not less. Nevertheless, the Tribunal has given a greater period for commencement or initiation of proceedings. We are not inclined to disturb the time limit of four years .....

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d down by the apex court. ........ 5.2 He has further relied upon the decision of the Bombay High Court in the case of Director of Income-tax (International taxation) v. Mahindra & Mahindra Ltd. reported in [2014] 48 taxmann.com 150, wherein the Bombay High Court has considered the decision of Calcutta High Court and observed in para 33, 35, 36, 37 as under:- 33. If one carefully peruses Section 201 (1) and 201 (1A) of the Income-tax Act, 1961, then, the principle laid down in the Delhi High .....

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are of the view that the Tribunal's order in this case does not suffer from any error of law apparent on the face of record or perversity warranting our interference in appellate jurisdiction. 36. We are also shown the judgment of the Calcutta High Court in the case of Bhura Exports Ltd. v. ITO (TDS) [2012] 202 Taxman 88/ [2011] 13 taxmann.com 161. With respect and for the reasons indicated by us above we cannot agree with the view taken by the Division Bench of the Calcutta High Court. That .....

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open. Equally, once we uphold the view of the Tribunal on the point of limitation, then, we must also clarify that we have expressed no opinion on merits of the impugned deductions/ claims in that regard. Therefore, we do not express any opinion on the rival contentions particularly as to whether there is any liability in terms of Section 201 of the Income tax Act, 1961 in the present case. 5.3 He submitted that as per above decisions, the period of limitation is four years. He has also relied u .....

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year). As such, if at all the proceedings for failure to deduct or pay TDS were to be initiated, it ought to have been reasonably done within the limitation provided for completion of assessment under Section 153 of the Act. The period of assessment or reassessment under Section 147 of the Act would be a different case, as it relates to income escaping assessment and not a normal, regular assessment. It would, thus, be a special provision and would not be a guiding factor for considering reason .....

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therefore, would not merit consideration. However, keeping in view the fact that the Tribunal, in various decisions, had taken the view that four years period would be a reasonable period of time to initiate action, the Delhi High Court held that where no limitation was prescribed (as under Section 201 of the Act), reasonable period would be four years. Following such decision of the Delhi High Court, the Tribunal also held that four years period would be a reasonable period for initiating actio .....

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words ought to have been 'may have been passed', which are not there. 23. In the memorandum explaining the provisions in the Finance (II) Bill, 2009, it was clearly stated that 'to provide sufficient time for pending cases, it is proposed that such proceedings for a financial year beginning from 1st April, 2007 and earlier years can be completed by the 31st March, 2011. As such, the memorandum itself clarified that the proviso is for pending cases, and not decided cases. The Circular .....

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ime of insertion of subsection (3) to section 201 of the Act. ......... 28. The Division Bench of this High Court, in the case of Solar Automobiles India (P) Ltd. v. Dy.CIT [2012] 17 taxmann.com 260/204 Taxmann 667 (Kar.) has, while dealing with a similar case, held in paragraph 9 of the judgment as under: Insofar as payment of interest under S.194 A (sic 201 (1A) is concerned, the interest is payable for the period it is not paid after deduction. The principal liability of paying tax is that of .....

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t context, the order passed by the authorities holding that the assessee is liable to pay interest from the date of default till the date of order is erroneous. However, the authorities have to find out whether the creditor has filed the returns and paid the tax. If he has filed the returns and paid the tax, the liability of the assessee ceases from the day they have paid the tax. 5.4 He has also relied upon the decision of the Delhi High Court in the case of Vodafone Essar Mobile Services Ltd. .....

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e to consider the provisions of Section 201 of the Act, which reads as under:- "201. Consequences of failure to deduct or pay:- (1) Where any person, including the principal officer of a company, (a) who is required to deduct any sum in accordance with the provisions of this Act; or (b) referred to in subsection (IA) of section 192, being an employer does not deduct, or does not pay, or after so deducting fails to pay, the whole or any part of the tax, as required by or under this Act, then .....

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as furnished his return of income under section 139; (ii) has taken into account such sum for computing income in such return of income; and (iii) has paid the tax due on the income declared by him in such return of income, and the person furnishes a certificate to this effect from an accountant in such form as may be prescribed: Provided further that no penalty shall be charged under section 221 from such person, unless the Assessing Officer is satisfied that such person, without good and suffi .....

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le to the date on which such tax is deducted: and (ii) at one and one-half per cent, for every month or part of a month on the amount of such tax from the date on which such tax was deducted to the date on which such tax is actually paid, and such interest shall be paid before furnishing the statement in accordance with the provisions of sub-section (3) of section 200: Provided that in case any person. including the principal officer of a company fails to deduct the whole or any part of the tax .....

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simple interest thereon referred to in subsection (1A) shall be a charge upon all the assets of the person, or the company, as the case may be, referred to in subsection (1 ). (3) No order shall be made under sub-section (1) deeming a person to be an assessee in default for failure to deduct the whole or any part of the tax from a person resident in India, at any time after the expiry of- (ii) two years from the end of the financial year in which the statement is tiled in a case where the state .....

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